Industry Voices—Byrne: Scratching the rose-colored lenses off CTIA’s industry survey

CTIA released a number of findings in its survey, including average data usage per wireless customer. (CTIA)

The CTIA released its annual Wireless Industry Survey in July. Since 1985, the CTIA survey has provided a nice summary of the U.S. wireless industry, which often mirrors trends being felt in other wireless markets, particularly in Western Europe and the rest of North America. With data collected directly from network operators, the CTIA survey has always provided a reliable source of bottoms-up data, which was no small thing two decades ago when there were literally dozens of publicly traded operators, and even more mom and pop operations that have, by and large, ended up consolidating into the handful of megacarriers that now dominate the market.

Since the roll-up, the CTIA survey has continued to provide keen insights into the state of the U.S. wireless market, and this year’s report was no exception. And there is no question that wireless service is more vital to Americans than ever. That’s confirmed by the high-level statistics: total connections grew to more than 400 million for the first time, data usage is up 40x since 2010, smartphone customers now generate an average of 5 GB of monthly data, and—finally—real momentum is being seen in small cell build-outs that everyone acknowledges is vital for robust 5G.

But as an analyst, I am trained to see the storm clouds instead of the rainbows. And I see plenty of storm clouds behind CTIA’s cheery outlook. Here are a few things that concern me:

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  • Data traffic up, revenues down: The CTIA estimated a record 15.7 trillion MBs of mobile data usage in 2017—nearly 4x from 2014 and 40x since 2010. Unfortunately, service revenue is heading in the wrong direction, declining by nearly $10B from 2016 to 2017 based on CTIA data. And while the CTIA is feverishly pushing 5G as the key to unlocking the next phase of wireless service, I have yet to see a convincing case that 5G will change the downward revenue trend that was felt painfully across the board last year.
  • Data-only connection growth not driving data growth: U.S. operators posted a 20% increase in data-only devices to 126.4 million, on the strength of connected cars, tablet connections and other IoT activity. That’s a nice offset to the decline in new human additions that has been happening for years but is not yet coming close to offsetting declining data revenue.
  • Network builds getting more expensive: The U.S. industry hit a milestone in 2017, exceeding $500 billion in cumulative capex since the beginning of wireless time. (That’s a half-trillion, folks.) That number on its own is relatively meaningless; the challenge is that it is getting steadily more expensive to build and maintain capacity. Cumulative capex per subscriber has increased steadily, from around $800 in 2001 to $1,000 in 2009, to nearly $1,300 last year. Two concerns: that’s about as much as the cost of an average fiber-to-the-home connection; and the steady increase fails the basic test of scalability. Cumulative capex/cell site tells an even more stark story, having nearly doubled since 2001 to nearly $1.6million. As an aside, I have a long-held theory that if operators had any sense of how expensive wireless networks would be to stay ahead of capacity, they would never have built them in the first place. Let’s all be glad their initial assumptions were wildly inaccurate.
  • Small cells, big deployment gaps: There actually seems to be a little bit of good news here, as total cell sites grew significantly compared to the past five years. That is—perhaps—a sign that U.S. operators like Verizon and Sprint that have recently touted plans to step up their small cell deployments are actually having some success breaking through the various civil works challenges that have stymied them for years. Still, by the CTIA’s own report, U.S. operators will actually need 800,000 new small cells to be built by 2026. On the regulatory side of the house, the CTIA is working to try to get municipalities, states or even the federal government to update regulations and application processes to encourage more small site builds, but realistically, the industry has a long, long battle ahead of it on small cells.

I want to be clear here: I love the CTIA annual update and the great data it provides to operators, vendors, and industry trend watchers. I just wish that rather than focus only on the positives, the CTIA could be more frank and forthright about some of the challenges wireless operators are facing, which its survey results make clear to anyone taking a closer look behind the headlines.

John Byrne is service director for global telecom technology and software at GlobalData. Follow him on Twitter: @Byrneingman.

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of our editorial staff.

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